The U.S. Federal Reserve yesterday raised overnight lending rates by 0.25 percentage points to a target range of ½ to ¾ of 1 percent, as expected by the vast majority of economists and market participants. For several days, the stock market rally was buoyed by the November election of a growth-oriented president. It raised bond yields and increased inflationary pressures to create new challenges for the U.S. Federal Reserve, yesterday raised rates for only the second time in the last decade. Read more about Rates Go Up, Let’s Tone Things Down 12-15-16
Yesterday, the U.S. Energy Information Administration (EIA) announced that U.S. commercial crude oil inventories fell by 2.4 million barrels from the week before, to 485.8 million barrels. In recent weeks, decreases in the U.S. oil stocks have brought oil in storage to the “upper limit of the average range for this time of year,” a change from the most of the last year, when inventories were described to be at or near historical highs.
This is another sign, we think, that oil’s worst days are behind it, and the U.S. and the world are likely entering an inflationary period. Read more about Inflation Rising...12-08-16
The Organization of Petroleum Exporting Countries (OPEC) Wednesday for the first time in eight years agreed to cut oil production in an effort to bolster oil prices. It will cut production by 1.2 million barrels a day, to 32.5 million barrels, to take effect in January. On December 9, OPEC officials will also meet with Russia and other non-OPEC oil exporters to finalize agreement to reduce non-OPEC production by some 600,000 barrels a day. If a deal can be struck, OPEC and non-OPEC cuts would total 1.8 million barrels per day.
In response, the price of global Brent benchmark crude oil increased by 9 percent Wednesday and today reached a one-year high of more than $54. By mid-day today, the Dow Jones Industrial Average was up more than 49 points, to nearly 19,171. Read more about Expectations Rise 12-01-16
So primed were pre-election markets to expect a Hillary Clinton victory that, as returns came in on November 8, U.S. stocks plummeted 5 percent in after-hours trading as a Donald Trump victory became clear. Trump’s gracious and conciliatory victory speech in the early hours of November 9 turned things around, and the market then rallied as attention turned toward the economic impact of Trump’s likely policies. On Monday, all four major U.S. stock indexes closed at new all-time records for the first time since 1999.
Yesterday, the four-pronged rally continued, as the Dow Jones Industrials broke 19,000 for the first time ever and closed at 19,023. The S&P 500 moved in lock-step to close at an all-time high of nearly 2,203. The Russell 2000 closed at a record 1,334.43. And the tech-heavy Nasdaq composite closed at more than 5,386. Read more about Optimistic Markets Spike 11-23-16
Little more than a week after the presidential election, economists seem to agree that when he takes office the administration of Donald Trump will likely introduce an era of increased U.S. economic growth and higher interest rates. Generally economists now expect that efforts to cut taxes and regulations and to invest in the crumbling U.S. infrastructure (roads, bridges, airports, water systems and even the electric grid) could stimulate substantive real economic growth, as opposed to the fiscal stimulus of the last several years that produced little.
As a result of the election, stocks have rotated somewhat, with health care, defense, and financial stocks turning upward due to the expectations that they will benefit from the presumed Trump economic programs. Worries about a downturn in international economic growth have subsided as well. Read more about Economic News Picks Up 11-17-16